Government debt has stabilised for the first time in 17 years, marking the defining outcome of Enoch Godongwana’s 2026 Budget Speech.
Gross national debt is projected to reach 78.9% of GDP in 2025/26 before beginning a gradual decline over the medium term. The consolidated budget deficit narrows to 4.5% of GDP, while the primary surplus is expected to strengthen steadily and exceed 2% of GDP by 2028/29.
After years of fiscal deterioration, credit downgrades and rising debt service costs, the National Treasury has positioned this moment as a structural inflexion point. Stabilising debt eases borrowing pressures and reinforces credibility in capital markets. Government has confirmed that it will introduce a principle-based fiscal anchor in the Medium-Term Budget Policy Statement to entrench fiscal discipline.
Tax Relief and Adjustments
The improved revenue outlook has allowed government to withdraw R20 billion in previously proposed tax increases. Personal income tax brackets and rebates have been fully adjusted for inflation.
Key tax changes include:
• The annual tax-free investment limit increases from R36 000 to R46 000.
• The retirement fund deduction cap rises from R350 000 to R430 000.
• The compulsory VAT registration threshold for small businesses increases from R1 million to R2.3 million.
• Excise duties and fuel levies will increase in line with inflation.
Infrastructure and Economic Reform
Public-sector infrastructure investment will exceed R1 trillion over the medium term. Priority areas include transport, logistics, energy and water infrastructure.
Support continues for PRASA to accelerate rail corridor recovery. Work is also underway to establish a Credit Guarantee Vehicle, in partnership with the World Bank, to mobilise private investment into electricity transmission.
Spending and the Social Wage
Total government spending will reach R2.67 trillion in 2026/27. More than 60% of non-interest expenditure is allocated to the social wage.
Social grant increases include:
• Old age, disability and care dependency grants rising to R2 400 per month.
• The child support grant has increased to R580.
• R26 billion allocated to provinces for HIV and Aids programmes.
Savings and Fraud Prevention
Treasury has identified R12 billion in targeted savings through expenditure reviews and fraud prevention measures. Improved verification systems have led to the termination of approximately 35 000 fraudulent or incorrect social grants.
Security and Governance
Spending on peace and security will increase over the medium term. Additional funding is directed towards tackling illegal mining and organised crime, as well as strengthening border management. The judiciary will also receive further support.
Financial Sector and Regulatory Changes
Government will introduce draft regulations to include crypto assets in the capital flow management framework.
More than R88 billion in unclaimed financial assets will be consolidated under a central administrator. The national payments system is being modernised in partnership with the South African Reserve Bank.
Growth Outlook
Economic growth is projected at 1.6% in 2026, rising gradually to 2% by 2028.
While risks remain, Budget 2026 signals a clear shift towards fiscal stability. The challenge now lies in converting that stability into sustained economic growth and stronger job creation.
